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Thursday, March 30, 2017

PRESS RELEASE - FTA: Brexit Also a Considerable Challenge for India

Brussels, 29 March 2017. Today, the British government will activate Article 50 of the Lisbon Treaty to formally launch the negotiations which will determine the conditions of the United Kingdom to leave the European Union (EU). The Foreign Trade Association (FTA) is pushing for a sound strategy to mitigate negative impacts, promote possible opportunities and effectively represent the interest of its members. “The upcoming talks should be conducted in a spirit of fairness, trust and partnership to make sure the negotiations advance quickly, create legal clarity soon and prevent major business disruption in Europe and in longtime partner countries, such as India”, says Christian Ewert, FTA Director General.

Brexit has plunged the EU into a time of significant uncertainty given that it is the first time that a member state has opted to leave the Union, and therefore, many questions remain to be answered. Despite this high level of uncertainty, Brexit clearly has the potential of having a considerable – negative – effect on the business sector and India:

Tariffs and border checks are very likely to be imposed in the future EU-UK trade relations;

Brexit might negatively impact economic growth – and consequently consumption – in the UK, the EU, India and the world;

The EU will lose a liberal voice and we might see a shift towards a more ‘defensive’ EU trade policy with all consequences for India;

Brexit is a setback for the concept and reality of global value chains; erecting new borders is turning the clock back and substantially diminishing the output of Indian investment in the UK.

To limit the impact of this process, Mr. Ewert underlines the priorities of the international trade sector in these divorce talks: “We need to invent a magic formula which will guarantee the highest possible level of market integration while avoiding a domino effect triggering similar leave requests from other EU member states. At the same time, we need to leave the door open for the British government to exit Brexit as the political mood in the UK might change again.”When it comes to the impact on India, it is important to stress that the relations with the EU should remain the priority, as the UK only represents 17% of the EU’s combined GDP. This does obviously not prevent India from pursuing active interests with the UK in the future, for instance by exploring the possibility of an investment or a free trade agreement. “However, one needs to make clear that the UK will not be able to start negotiating before they leave the EU. In addition, British interest is mostly on services, which tends to be the most difficult chapter in trade agreements”, Mr. Ewert concludes.

FTA will remain an active advocate for a smart Brexit process that safeguards open markets and business interests, against the current protectionist trends gaining ground in Europe and abroad.